Bitcoin Vs Goldcoin

Bitcoin… Monetary Nirvana?

If you don’t know what Bitcoin is, do a bit of research on the internet, and you will get plenty… but the short story is that Bitcoin was created as a medium of exchange, without a central bank or bank of issue being involved. Furthermore, Bitcoin transactions are supposed to be private, that is anonymous. Most interestingly, Bitcoins have no real world existence; they exist only in computer software, as a kind of virtual reality.

The general idea is that Bitcoins are ‘mined’… interesting term here… by solving an increasingly difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again interesting- on a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It is then possible to trade real goods or Fiat currency for Bitcoins… and vice versa. Furthermore, as there is no central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘managed’ by authority.

Naturally proponents of Bitcoin, those who benefit from the growth of Bitcoin, insist rather loudly that ‘for sure, Bitcoin is money’… and not only that, but ‘it is the best money ever, the money of the future’, etc… Well, the proponents of Fiat shout just as loudly that paper currency is money… and we all know that Fiat paper is not money by any means, as it lacks the most important attributes of real money. The question then is does Bitcoin even qualify as money… never mind it being the money of the future, or the best money ever.

To find out, let’s look at the attributes that define money, and see if Bitcoin qualifies. The three essential attributes of money are;

1) money is a stable store of value; the most essential attribute, as without stability of value the function of numeraire, or unit of measure of value, fails.

2) money is the numeraire, the unit of account.

3) money is a medium of exchange… but other things can also fulfill this function ie direct barter, the ‘netting out’ of goods exchanged. Also ‘trade goods’ (chits) that hold value temporarily; and finally exchange of mutual credit; ie netting out the value of promises fulfilled by exchanging bills or IOU’s.

Compared to Fiat, Bitcoin does not do too badly as a medium of exchange. Fiat is only accepted in the geographic domain of its issuer. Dollars are no good in Europe etc. Bitcoin is accepted internationally. On the other hand, very few retailers currently accept payment in Bitcoin. Unless the acceptance grows geometrically, Fiat wins… although at the cost of exchange between countries.

The first condition is a lot tougher; money must be a stable store of value… now Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in just a few years. This is about as far from being a ‘stable store of value’; as you can get! Indeed, such gains are a perfect example of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks.

Of course, Fiat fails here as well; for example, the US Dollar, the ‘main’ Fiat, has lost over 95% of its value in a few decades… neither fiat nor Bitcoin qualify in the most important measure of money; the capacity to store value and preserve value through time. Real money, that is Gold, has shown the ability to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as money.

Finally, we come to the second attribute; that of being the numeraire. Now this is really interesting, and we can see why both Bitcoin and Fiat fail as money, by looking closely at the question of the ‘numeraire’. Numeraire refers to the use of money to not only store value, but to in a sense measure, or compare value. In Austrian economics, it is considered impossible to actually measure value; after all, value resides only in human consciousness… and how can anything in consciousness actually be measured? Nevertheless, through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if only momentarily… and this market price is expressed in terms of the numeraire, the most marketable good, that is money.

So how do we establish the value of Fiat… ? Through the concept of ‘purchasing power’… that is, the value of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. But his clearly implies that Fiat has no value of its own, rather value flows from the value of the goods and services it may be traded for. Causality flows from the goods ‘bought’ to the Fiat number. After all, what difference is there between a one Dollar bill and a hundred Dollar bill, except the number printed on it… and the purchasing power of the number?

Gold, on the other hand, is not measured by what it trades for; rather, uniquely, it is measured by another physical standard; by its weight, or mass. A gram of Gold is a gram of gold, and an ounce of Gold is an ounce of Gold… no matter what number is engraved on its surface, ‘face value’ or otherwise. Causality is the opposite to that of Fiat; Gold is measured by weight, an intrinsic quality… not by purchasing power. Now, have you any idea of the value of an ounce of Dollars? No such thing. Fiat is only ‘measured’ by an ephemeral quantity… the number printed on it, the ‘face value’.

Bitcoin is farther away from being the numeraire; not only is it simply a number, much as Fiat… but its value is measured in Fiat! Even if Bitcoin becomes internationally accepted as a medium of exchange, and even if it manages to replace the Dollar as the accepted ‘numeraire’, it can never have an intrinsic measure like Gold has. Gold is unique in being measured by a true, unchanging physical quantity. Gold is unique in storing value for thousands of years. Nothing else in reach of humanity has this unique combination of qualities.

In conclusion, while Bitcoin has some advantages over Fiat, namely anonymity and decentralization, it fails in its claim to being money. Its advantages are also questionable; the intent is to limit the ‘mining’ of Bitcoins to 26,000,000 units; that is, the ‘mining’ algorithm gets harder and harder to solve, then impossible after the 26 million Bitcoins are mined. Unfortunately, this announcement could very well be the death knell of Bitcoin; already, some central banks have announced that Bitcoins may become a ‘reservable’ currency.

Wow, sounds like a major step for Bitcoin, does it not? After all, the ‘big banks’ seem to be accepting the true value of the Bitcoin, no? What this actually means is banks recognize that they could trade Fiat for Bitcoins… and to actually buy up the 26 million Bitcoins planned would cost a meagre 26 Billion Fiat Dollars. Twenty six billion Dollars is not even small change to the Fiat printers; it is about a week’s worth of printing by the US Fed alone. And, once the Bitcoins bought up and locked up in the Fed’s ‘wallet’… what useful purpose could they serve?

There would be no Bitcoins left in circulation; a perfect corner. If there are no Bitcoins in circulation, how on Earth could they be used as a medium of exchange? And, what could the issuers of Bitcoin possibly do to defend against such a fate? Change the algorithm and increase the 26 million to… 52 million? To 104 million? Join the Fiat printing parade? But then, by the quantity theory of money, Bitcoin would start to lose value, just as Fiat supposedly loses value through ‘over-printing’…

We come to the key issue; why search for a ‘new money’ when we already have the very best money, Gold? Fear of Gold confiscation? Lack of anonymity from an intrusive government? Brutal taxation? Fiat money legal tender laws? All of the above. The answer is not in a new form of money, but in a new social structure, one without Fiat, without Government spying, without drones and swat teams… without IRS, border guards, TSA thugs… on and on. A world of liberty not tyranny. Once this is accomplished, Gold will resume its ancient and vital role as honest money… and not a moment before.

Rudy J. Fritsch was born in Hungary in 1947, and fled Socialist tyranny during the Hungarian Revolution of 1956. His family had lived through WWII and the consequent Hungarian hyperinflation, thus he has intimate experience with financial destruction.

As an engineer and entrepreneur, he ran a successful family business in Canada for decades, at its peak employing over 100 workers, until economic upheaval destroyed the profitability of North American manufacturing. Driven out of business, he decided to study economics… to discover the cause of this unhappy circumstance.

As mainstream economics “The Dismal Science” made no sense to him, he ended up studying Austrian economics, the only school of economics grounded in the realities of Human Action. When he discovered Professor Antal Fekete’s work he came to admire it and made a firm commitment to help preserve and disseminate the Professor’s legacy.

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Power of Illusion, Illusion of Power

In my last articles I pointed out the fatal flaws of the current ruling paradigm; the paradigm of materialism rooted in dualistic thinking. Materialism not only fails to explain many essential aspects of our reality, but its logical structure also fails.

Materialism fails to explain past life recall, reincarnation, near death experience, telepathy, telekinesis and so forth… even though evidence for all these phenomena is well documented and statistically unassailable. Materialism fails to explain the origin of life on Earth, speciation, consciousness… and yet science is holding on to this false belief system, this illusion, seemingly at all cost.

Materialism also fails by internal logic; matter, considered fundamental by materialism, is convertible into energy and energy into matter. Nuclear energy and particle accelerators do this conversion every day, without doubt. If matter were truly fundamental, the ultimate basis of all existence, this conversion could not happen.

For matter to be converted into energy and for energy to be converted into matter there must be a common functioning principle through which the conversion occurs… and the CFP of matter/energy must by definition be more fundamental than either matter or energy. Matter and energy are the flip sides of a more fundamental CFP, whatever it may be.

The power of illusionary belief is immense; mainstream science is constrained by false belief, by illusion. The dogmas of materialist science are rooted in illusion; no evidence showing the failure of the prevailing paradigm or illusion is examined or even admitted to exist. The taboo against such investigation is too powerful for all but a few mavericks who investigate reality in spite of mainstream dogma.

History is filled with examples of the power of illusion; when the illusion that the Earth is flat prevailed, voyagers were afraid to travel out to sea because they would ‘fall off the edge’. When Galileo showed that the Earth is not at the center of the universe, the powers that be… in his case cardinals of the Catholic Church… refused to look through his telescope. Looking at the evidence was forbidden by taboo. Looking and seeing would have been an admission that their beliefs, aka illusions, were wrong.

Eventually all illusion is shattered; once the illusion of a flat earth vanished, sailors crossed the seas without any fear of ‘falling off the edge’. Once the illusion that the Earth is at the center of the universe vanished, science and cosmology progressed without hindrance.

The biggest illusion of all is the illusion of power. Specifically, real power is conflated with illusion of power. The US military is arguably the most powerful in the world. The destructive power inherent in the myriad guns, bullets, rockets, and bombs this military commands is beyond doubt. The illusion lies in the belief that a single man, the Commander in Chief, controls this awful power. The illusion is that hundreds of thousands of humans acts at the whim of one person; that the ‘chain of command’ represents real power.

The chain of command is an illusion, and has power only if and as long as the illusion remains intact. Mutinies, military stand-downs, revolutions, civil wars are all examples of shattered illusion. Once shattered, illusion loses power. Such is the fate of all illusion, even if extraordinary efforts are made by TPTB to maintain an illusion.

In the Soviet military, once considered the second greatest power on Earth, communist ‘commissars’ accompanied the troops… to make sure that orders were obeyed, that the illusions of Communism were upheld, at the pain of death. Indoctrination, brainwashing, threats are used to maintain the status quo, the ruling illusion… but eventually the illusion shatters, and the power of the illusion vanishes.

At this very moment in history we are witnessing the destruction and imminent breakup of the power of a major illusion. Ebola is a horrific affliction but it brings another illusion to the forefront. If Ebola truly goes ‘viral’, the illusion of the power of mainstream medicine will be shattered at a wondrous pace.

In a recent interview, an American doctor gave away the illusion, by pointing to its heart. Many other doctors see the truth, see through the illusion… see truth that is being withheld by ‘the powers that be’, with the excuse that ‘we must act to prevent panic’.

Another American doctor, just back from Sierra Leone, has shown that Ebola can be cured by a simple method of blood treatment using ozone. The ozonation of blood kills the Ebola virus, and helps to regulate the immune system. Immune system over reaction to viral invasion seems to be the proximate cause of symptoms and death; Ebola is an autoimmune disease.

The powers that be refuse to allow ozone treatment… because it is taboo, because it violates the current illusion that vaccination is the answer… and to be brutally frank; there is no wealth to be made using ozone therapy. Ozone is dirt cheap, vaccines are lucrative.

The reality is that ozone treatment is forbidden… at the pain of a doctor losing his license to practice. But this ‘license to practice’ is just a piece of paper. Who cares about a piece of paper if nasty, immanent death threatens? Even though many doctors still obey, others are ready to shatter the paradigm in spite of threats by ‘TPTB’. The threat of death by Ebola is stronger than the threat of losing the piece of paper.

Real power lies in the power to cure, not in the piece of paper. As the truth emerges that a cheap, safe, easy method to cure the horror of Ebola exists, and that some doctors are using this method to save lives, the power of truth will easily overcome illusion. The power of the medical establishment will shatter and scatter like chaff in the wind.

This brings us full circle to the most insidious, destructive illusion of all; the illusion that Government issued paper with numbers printed on it is money. This pernicious illusion underlies the power to control and manipulate the world economy to the benefit of the perpetrators, at the expense of the rest of humanity, the victims.

Enormous power lies in the illusion of Fiat ‘money’… but like all illusion, is subject to being shattered by truth. Once the illusion of the ‘faith and credit’ that purportedly backs Fiat currencies is destroyed, a new era of real money will emerge. Real money, Gold; not paper notes borrowed into existence without limit. Truth will replace the illusion and lies of Fiat.

Just as the power of a gun is real, but the power to command where the gun is aimed is an illusion, just as the power to cure disease is real but the license to cure is an illusion… so the power of Gold to extinguish debt is real but the power of Fiat is illusion.

Rudy J. Fritsch was born in Hungary in 1947, and fled Socialist tyranny during the Hungarian Revolution of 1956. His family had lived through WWII and the consequent Hungarian hyperinflation, thus he has intimate experience with monetary destruction.

A student of Austrian economics, he is Honorary Chairman of Fekete Research and holds a Masters Degree in monetary science from the New Austrian School of Economics.

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The Future of Currency Is Digital

Would we be better off without paper money and coin? Some say yes, and some say no and the debate rages on. Government tax collectors would prefer only electronic or digital money – it’s easier to control and easier to keep taxpayers honest – but are those gains worth the drawbacks? I mean what’s wrong with cash – you can spend it anywhere, you can pay your babysitter, go to a garage sale, or stop at a lemonade stand – all of which are part of our underground economy by definition and harmless uses of transferring money.

Then there are the illegal things, no one uses digital money because it leaves a trace, so you cannot use it to buy things you are not allowed to buy or that someone else is not allowed to sell. Does it thus, make sense to get rid of the money that allows illegal transactions, shut down the entire underground economy and if we do, will our society and civilization be better or worse off for that solution? Let’s discuss this shall we?

Yes, a digital currency would be similar to regular currency and really we are almost there already anyway. If we go to “digital units” and change the paradigm to cover the needs of people who contribute who are not rewarded fairly now, then we will get more of what we reward, as is the famous axiom. A technocrat would enjoy this conversation and the thought of micro-managing the exact worth of every job, but technocrats are not so good at considering their own created unforeseen consequences as they pave the road to hell.

The reason humans use money now is simply because things and choices are more complicated than they were in the past when our species were only hunters, gatherers and traders. Let me explain; you see, if I make hammers and you need one, but you only have cattle, then you cannot cut off the tail of your cow to buy my hammer, so instead you give me $11 and you can sell your cow in the future for $1100 and give me the one-percent of it so you can build a new barn.

Money and currency is nothing more than units of trade thus, make things easier, that’s why it exists, but I do not like the bashing of currency, digital or otherwise, where many believe it is the root of all evil. I respectfully disagree. Please consider all this and think on it, as this topic does affect your life.

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